Supply Chain Management Failure of Gm

Topics: Supply chain management, Supply chain, Management Pages: 3 (852 words) Published: October 24, 2011
General Motors

1. Describe three SCM practises use by GM that would have negatively impacted their return-on-assets. Define this impact in terms of specific ROA components (e.g. sales, assets)? The return on asset (ROA) is a percentage that measures how profitable a company’s assets in generating revenue. ROA can be computed as: Net Income / Mode of Total Asset. This number tells us what the company can do with what it has. Three SCM practices used by GM that negatively impacted their ROA are described below: Poor Inventory Management

GM offered a vast range of vehicles, which resulted in extra production lines and GM had to keep a track of larger number of models, different manufacturing facilities and large number of suppliers resulting in inefficiencies across the supply chain. This increased costs resulting in lower earnings and ROA. There was an absence of lean manufacturing compared to Japanese automakers. Forecasting Issues

GM’s traditionally forecasted sales over a long time horizon compared their Japanese competitor. This was driven by the company culture and reliance on volume contracting. Long forecast means that when the times were bad and sales dropped, GM was left with higher volume orders, which contributed towards excessive inventory. Legacy Payments

Every year the cost of retired workers’ health care added $1,400 to the cost of each car compared with those made in the Asian and European transplants. So, GM kept production high and sustained sales with costly dealer incentives and heavily discounted fleet sales. GM’s liabilities in supplier payments, workers entitlements and dealership commitments would have led them to bankruptcy. 2. Describe how the internal managerial culture at GM might have contributed to their bankruptcy? Lack of cohesion

GM operated the different divisions of the company as separate, independent entities or business units. Although this structure was successful at times, it created a fragmented...
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